Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It improves the current account by reducing imports from the EU.
B
It worsens the current account as higher disposable income increases imports from the EU.
C
It has no effect on the current account since income changes do not influence trade.
D
It leads to a balanced current account as exports will automatically increase to match imports.
Understanding the Answer
Let's break down why this is correct
Answer
When U. S. real income increases, people in the country generally have more money to spend. This often leads to higher demand for imported goods, including products from the EU. As Americans buy more European goods, the amount of money flowing out of the U.
Detailed Explanation
When people in the U.S. Other options are incorrect because This answer suggests that more income means less buying from the EU; This option thinks income changes don't affect trade.
Key Concepts
Current Account Balance
Impact of Real Income on Trade
Trade Deficits
Topic
Current Account and Trade Balance
Difficulty
hard level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.